What to read?
Well, if you're a deal-geek like me, there's plenty of good stuff out there. Here's what I've been reading, and what's on my list:
Books Recently Read:
- Gods at War: Shotgun Takeovers, Government by Deal, and the Private Equity Implosion, by Steven Davidoff (aka, the "Deal Professor" on NYT's DealBook). Awesome book outlining the legal consequences, drivers, and limitations to many deals that happened in the last 24 months. The book provides great 'color' to the otherwise "surfacy" coverage provided my the media. Davidoff delves into the purchase agreements of numerous deals with scrupulous details and illuminates, with reference to DE Chancery Ct decisions, the "whys" behind numerous nuances of the deals. Awesome, but technical read.
- House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, by William Cohan. This book gives vivid detail to the collapse of Bear Stearns. It's written in 3 parts: first, an up-close look at the 2 weeks in March '08 when BS' cash account went from $18B to a Chapter 11 filing. It shows the weakness of the public investment bank model that depends on overnight financing, prime brokerage accounts, and trust. Vicous circles -- whether rumors are true or false -- will kill the company. Second, it zooms out and shows the long history of BS. This part I found more helpful. It showed the firm's cultural penchant for risk, its bad-boy attitude on Wall Street, its conduct during LTCM, and how all of those events culminated in March '08. Third (perhaps most boringly), it detailed the creation of its two exotic funds - remember the "Enhanced Leverage Fund" - that killed the firm. Reading this portion was particularly interesting in light of the Securites Fraud case ongoing in 'real time' regarding Ralph Cioffi and Matt Tannin. (As an aside, this book made me want to learn to play Bridge - yet, after asking dozens of friends, it seems that that game is, almost without exception, played by the older generation.)
- Big Deal: The Battle for Control of America's Leading Corporations, by Bruce Wasserstein. This is "Bid 'Em Up Bruce" 's tome, written from the insider's perspective, of the 80s' and 90s' battles for corporate control (No surprise there, given the title!). At 791 pages, I'm not sure whether the reader needs to read each page in gripping detail. But Bruce does a good job of both entertaining and teaching the reader about the industry from a strategic, financial, and legal standpoints (he went to HBS/HLS, and worked at Cravath before CSFB, then founding Wassersten Perella, and then CEO of Lazard). The last section, "Doing the Deal", is particularly educational for the aspiring deal professional.
- Barbarians at the Gate: The Fall of RJR Nabisco, by Burrough and Hellyer. This is an absolute classic. And for good reason, too. The book is an absolute thriller - with amazing detail and great characters, it's impossible not to be drawn into this account of KKR's "coming out party" in its 1989 LBO acquisition of one of America's largest corporations. The $26B takeover remained the biggest deal ever consummated for well over a decade. But the book had some good info/technical info, too. It showed the value of creativity in putting together an offer (First Boston's bid was entertained b/c of its tax structure), plus the personality-dynamic (the Board's aversion to Mgmt/Shearson's offer due to F. Ross Johnson's personal handling of the offer). From a CorpFin standpoint, one thing the book reinforced was the valuable role PE plays in the market for corporate control through the disciplining of management. Part of the attraction of making a bid on RJR was the abuse, by RJR management, of the principal-agent problem. FRJ abused his role through the use of perquisites (the RJR Airforce and his squad of favored athletes on retainer) at the expense of the true owners of the firm. KKR fixed that problem by realigning mgmt-S/H interests.
- Tender Offer: The Sneak Attack in Corporate Takeovers, by Dorman Commons. This 1985 book chronicles the at-first hostile, and then friendly takeover of Natomas Company by Diamond Shamrock. What makes this book excellent is that it's essentially a first-hand narrative by the CEO of TargaCo of what he did during those 10 days between announcement of hostile takeover and deal agreement. From the strategic, legal, and financial standpoints, this book gives good insight into why the deal industry is so multi-disciplinary. Another interesting part of this book is that the DS-Natomas deal fits into the larger en vogue corporate strategy of the 1980s: conglomeration. Barbarians at the Gate -- which chronicled the breakup of RJR/Nabisco -- serves as a natural bookend to this movement, since private equity helped the market learn that conglomeration is not a value-maximizing strategy: the sum of the parts is greater than the whole. Wasserstein chronicles this evolution very well.
- Billion Dollar Turnaround: The 3M Spinoff that Became Imation, Bill Moynihan. Moynihan is the former CEO of Imation, and led it through its spinoff and its subsequent winnowing to its core competency of data storage. During that time, he shrunk the firm from 12,000 employees to 2,000. More impressively, he took the company from one that was saddled with debt to one that was lean and a strong cash generator. The book does a good job of describing the morale and management issues inherent in the spinoff of a brand new company from a staid, stable, and secure parent company. (The spinoff also fits into the time period where corporate America's lost its affection for conglomerates). My biggest disappointment was that Moynihan never discussed the rational that led to his financial decisions. What did the balance sheet look like upon spinoff? What did he get for the divisions he sold? And what was the multiple of that sale? This information would be more educational, as opposed to the chest-thumping that more often padded the book.
- Too Big to Fail, by Andrew Ross Sorkin. Sarkin -- the editor of NYT's DealBook -- gives a first-hand account (based on his contacts within High Finance professionals in Manhattan) of the backroom deals struck during the last 24 months. I've watched Sorkin's interview with Charlie Rose concerning the book, and am on the waiting list with Hennepin County for the book. I can't wait; it should be another thriller.
